BP's Rosneft collapse puts Shell, Exxon back in play

MOSCOW |LONDON: The collapse of BP Plc's alliance with Russia's state-run oil company Rosneft brings one of the world's largest untapped drilling opportunities back onto the market.

Royal Dutch Shell, Exxon Mobil and Chevron are potential candidates should OAO Rosneft look for a new partner to explore the Kara Sea in Russia's Arctic, a person with knowledge of the company's plans said, declining to be named because the matter is private. Rosneft will start talks with replacements immediately, another person said on Tuesday.

BP's four-month battle to salvage the Rosneft deal, which included a $7.8 billion share swap, was driven by the chance to unlock as much as 15 billion barrels of oil, equal to more than five years of US crude production. The biggest oil companies are competing for a diminishing number of drill sites as foreign governments deny access to resources and existing fields are depleted. "It isn't difficult to find partners for the Arctic," said Valery Nesterov, an oil industry analyst at Troika Dialog in Moscow.

Russia, the world's largest crude oil producer, has sought deals with international oil companies to exploit offshore fields that require more technology and capital to drill than deposits on the Siberian mainland. Rosneft would probably favor US and European companies over Asian peers because of their experience in offshore drilling and superior technology and personnel, said Brian Gallagher, an analyst at Dolmen Securities Ltd. in Dublin.

"It has to be a supermajor because you have to bring a certain amount of political clout," he said. "You need to have enough capital to operate in these waters, and not that many companies have the experience."

A Rosneft spokesman said the company is studying the situation and will make a choice in the near future.

Shell Chief Executive Peter Voser said on Tuesday his company, which already has projects with Russian gas exporter OAO Gazprom, is interested in expanding in Russia. He declined to comment specifically on the Kara Sea.

Exxon and Chevron have both reached offshore deals with Rosneft in the past year. Exxon agreed on January 27 to explore the deepwater Tuapse Trough in the Black Sea, where Chevron signed an accord last year for a separate area. "Chevron continues to work with Rosneft on opportunities to collaborate in business ventures," Kurt Glaubitz, a spokesman for the San Ramon, California-based company said in a telephone interview. Glaubitz declined to specify what prospects, assets or locations within Russia are under discussion. Patrick McGinn, an Exxon Mobil spokesman, sent an e-mailed statement declining to comment on commercial matters.

BP and Rosneft had agreed to explore 125,000 square kilometers of the Kara Sea, north from Russia's largest developed fields in West Siberia. The area may have as much as 50 billion barrels of oil in place, of which 12 billion to 15 billion is recoverable.